Mrs
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Mrs. and Mr. Anders have three children who, at the end of the current year, are 4, 12, and 18 years of age. The 18 year old child has a serious physical infirmity, but does not qualify for the disability tax credit. Mrs. Anders had earned income of $18,000, while Mr. Anders had earned income of $69,000. Payments for child care were $190 per week for a total of 50 weeks.
During the current year, Mrs. Anders spent six weeks in jail as the result of a conviction for possession of an illegal substance. Following her release, Mr. Anders spent three weeks in the hospital because of a stress related disorder.
Determine the maximum deduction for child care costs and indicate who should claim them.
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Total Child care cost : $190 x 50 weeks = $9500
Maximum Child care expense $6,000
Multiply by : 20%
Maximum deduction for child care cost $1,200
Who should claim them ? Mr. Anders
Step-by-step explanation
- The maximum child care expense for 2 or more dependent is $6,000.
- If the child lived with both parents equally, then the IRS requires the parent with the highest adjusted gross income to claim the child. In this problem Mr. Anders earned higher income than Mrs. Anders.
- Tax credit for child care is 20% for income of $43,000 or more (Mr. Anders earned $69,000).
- Maximum deduction for child care is $1,200 (by getting the 20% of $6,000 or the maximum allowable child care expense)
